Fiscal Policy and Civil Conflict in Africa

Abstract

I explore empirically the effect of fiscal policy responses to economic shocks on the likelihood of conflict in Africa. The main finding is that a countercyclical fiscal response to these shocks lowers the likelihood of conflict. This result is stronger when considering positive shocks to the price of mineral commodities and negative shocks to the price of agricultural commodities as the triggers to macroeconomic cycles. The effect is focused on politically underdeveloped countries and has been stronger during the last decades. Although macroeconomic income shocks are behind conflict onset, the effect of the fiscal response is not only associated with macroeconomic stabilisation.